By Aditya Soni and Kenrick Cai
(Reuters) - Google (NASDAQ:GOOGL) is facing a bigger threat from Sam Altman's OpenAI even as it awaits a decision on how antitrust regulators in Washington plan to level the playing field in the internet search business.
A US ruling on Monday, which found that Google built an illegal search monopoly, is being considered a big win for regulators. But an increasing number of people using AI tools including OpenAI's popular ChatGPT chatbot is already eroding Google's dominance, sources, investors and analysts said.
"I think for Google right now, AI (is) a much bigger deal than the ruling. AI is fundamentally changing how the search product also works," said Arvind Jain, a former Google engineer who worked on products including Search for a decade.
Jain, who now runs an enterprise search firm called Glean, said AI's impact was immediate compared with any impact from these rulings that get appealed and take a long time to affect a market.
Google has long been synonymous with search, commanding around 90% of the global market share and bringing in about $175 billion in annual revenue through the business. Even Apple (NASDAQ:AAPL), which prefers to build all the software and much of the hardware that goes into its devices, has allowed Google to be its default search engine for a handsome fee.
But the days of preferential treatment for a fee are over even before slew of antitrust court cases resolve. In its AI foray, Apple announced a partnership with OpenAI to bring ChatGPT to its upcoming devices. It emphasized the deal's non-exclusive basis and talked up the likelihood of bringing on Google as another partner.
A ruling against Google will speed up Apple's move towards AI-powered search services, if it is forced to end its Search deal with Google, analysts have said.
Microsoft-backed OpenAI said last month it was also breaking into the search game with a slow launch of SearchGPT, an AI-powered search engine with real-time access to information from the internet.
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One former senior Google executive predicted, "AI is going to move faster than the speed that DOJ can move against Google. The whole monopoly will be over, in other words, the speed at which AI will take over search."
Both the former Google executives as well as many Wall Street analysts agree that Google has the raw material needed to take a lead in AI - a large language model to train its AI and a search engine. But the company's efforts seem scattered in the face of OpenAI's onslaught, which is attracting younger users.
Generative AI's popularity caught Google by surprise. Despite being the source of foundational research behind the technology, it did not release a consumer product until well after ChatGPT became the fastest-growing consumer app in early 2023.
"The biggest threat to Google may be Google itself - key to adoption of any AI is trust, and its original missteps with Search Overviews showed that Google's engineers were focused more on rapid releases than getting it right as it tries to keep up with the pace of OpenAI and others," said Rebecca Wettemann, CEO and principal analyst at research firm Valoir.
Wettemann referred to Google's AI Overviews, a new feature that employs AI to answer search queries that appear ahead of links. It drew fire from publishers watching referral traffic from Google decline and was criticized for delivering errors including telling users to eat glue and saying Barack Obama was a Muslim. Google scaled back the feature earlier this year.
Gil Luria, an analyst at D.A. Davidson, believes the regulatory scrutiny as well as the AI threat are related. "Part of the reason (the DOJ) are coming after Google's business practices is that the market is in fact in flux right now and they want to make sure Google does not extend its current market dominance."
While the antitrust ruling may not have a big impact on Google yet, it should open the search market up for more players, said Richard Socher, CEO and founder of AI search engine startup You.com and former chief scientist at Salesforce.
He added, though, that ending Google's dominance in search will be "very hard."
"No one has really made a big dent into Google search dominance yet ... we'll have to see if this will be yet another domino piece that will fall into place to actually give consumers some more choices, real choices."